Health Service Medical Supplies (Costs) Bill

James Davies Excerpts

2nd reading: House of Commons & Programme motion: House of Commons
Monday 24th October 2016 Commons Chamber

[Dr James Davies (Vale of Clwyd) (Con)]

It is a pleasure to speak in support of the Bill, which affects my constituents in north Wales as it applies UK-wide. It is an example of the Government responding reasonably quickly to issues that have been brought to their attention, and they deserve some credit for that.

My principal reason for supporting the Bill relates to the vast increase in the costs of certain off-patent drugs, as we have heard today, and its impact. I first had contact with constituents in June about a loophole in existing regulations resulting in some old generics being hiked up in price by up to 12,000% over the course of eight years. This followed the investigation in The Times in which 50 drugs were identified as costing the NHS about £262 million a year. To put that into perspective, it is equivalent to 7,000 junior doctors. I believe that there have not been similar price increases in mainland Europe, interestingly, which tends to suggest that we have some failures in our regulations. We also discussed this matter in the Health Committee and we saw evidence of correspondence that had highlighted it for at least one year.

We should not refer just to costs, of course. There are also big impacts on patients when their drugs are withdrawn. That issue hit home when I met a constituent, Eira Roche, at one of my constituency surgeries in the summer. She has given me permission to talk about her story. She was diagnosed with hypothyroidism—an underactive thyroid—in 2006. She had the typical symptoms of weight gain, thinning hair and brittle nails. She was tired all the time, she had pain all over and she had a low mood. She was prescribed T4—thyroxine—which is the usual treatment in such circumstances. She was also given a cocktail of other drugs, because the T4 simply did not work. She was on quite strong medication for an extended period.

Eira saw her endocrinologist at Glan Clwyd hospital in my constituency in 2014, and he started her on a drug called T3—liothyronine—which she describes as an absolute revelation. In fact, she said that she was much better than she had been for years: her brain fog lifted and her energy levels soared. When she tried to reduce the dose of the drug, she found that her symptoms began to return and she had to have some time off work. She is now a teaching assistant and caretaker at Ysgol Bodfari.

The drug Eira is taking, liothyronine, was acquired from GlaxoSmithKline in 1992 by Mercury Pharma, which is now part of AMCo. To put the costs into perspective, a packet of the drug cost £34.65 in 2011, but this year the cost is £258.20, which is a 645% increase. Shockingly enough, that increase is relatively insignificant compared with some other examples, but it is still quite significant. I understand that drugs costing £3.4 million a year in 2010 now cost the NHS over £20 million a year.

My local health board, Betsi Cadwaladr University Health Board, is understandably concerned, as are other parts of the NHS in the UK, and it has looked at withdrawing the drug. That makes Eira feel very anxious. She is worried about the impact on her colleagues if she is unable to work, and about the impact on her pupils with special educational needs and other needs. She also has two children of her own. The Department of Health has asked the Competition and Markets Authority to investigate this issue. That may or may not result in a good outcome, but it is not a sustainable way forward: it will not close the loophole or stop the same thing happening again. That is one reason why we need this Bill.

The generics market is generally competitive, with fair prices for all. I believe it accounts for £4 billion of the £15.2 billion spent by the NHS on drugs per annum. However, the £4 billion figure represents a 20% rise during the past five years. There is a statutory system, which can in theory control the prices of both branded and generic drugs, but there is the loophole I have mentioned.

The loophole involves old generics that are usually available via one manufacturer or supplier that also happens to market branded drugs and is a member of the voluntary pharmaceutical price regulation scheme in relation to them. Their membership of the PPRS means that, under existing legislation, they cannot currently be subject to the statutory scheme, even for their generic drugs. There are concerns that this loophole has been actively exploited by some. Indeed, it has been a deliberate business model to purchase off-patent medicines for which there are no competitor manufacturers—in other words, where there is no competition. Hon. Members might ask why other drug companies have not sought to manufacture such drugs if they are sold in such large quantities. Introducing new competition is not always feasible, however, because of the time it takes to obtain a rival licence from the Medicines and Healthcare Products Regulatory Agency, and because the size of the market is often small once such medications are produced and the manufacturing process is often difficult.

I support a change in the primary legislation—the National Health Service Act 2006—to allow the Government to consult on and bring forward the enforcement of statutory controls on all generic drugs to require companies, if necessary, to reduce the price of the drugs or to impose other controls. This amounts to an extension of the existing deterrent powers that the Secretary of State has not yet used to direct the prices of drugs that already fall under the statutory scheme. Assuming the Bill receives Royal Assent early in 2017, we would need investigations and discussions with the companies concerned where issues have been raised. It is important to be fair not only to the taxpayer but to such companies. If not, there remains the ultimate risk that such products are taken off market.

Where does that leave my constituent, Eira? I am sure she is hoping that the Bill will go through. She will be looking to the CMA to come forward with some good news. She may be tempted to purchase the liothyronine from abroad or online. Interim prescriptions to allow patients like her to continue to receive her prescription need to be considered. If the Government feel that the drugs can be acquired at a much better rate—from abroad, for instance—such people would very much appreciate assistance in doing so. For everyone, the routine and systematic monitoring of drug costs will clearly be important.

I will briefly mention the two other principal elements of the Bill. The first is the proposed change to the statutory scheme. In autumn 2015, the Secretary of State issued a statutory consultation on strengthening the statutory scheme. The Bill proposes to bring the statutory scheme in line with the voluntary 2014 PPRS for all manufacturers or suppliers that are not PPRS members. There are 166 companies currently represented in the PPRA, and £8 billion is currently spent through that mechanism. Interestingly, £647 million is brought back to the taxpayer each year when the agreed cap is exceeded. There are just 17 companies in the statutory scheme, through which £l billion is spent. There is evidence of companies switching from the voluntary to the statutory scheme for financial reasons, meaning that there is an £88 million annual loss to the taxpayer. It should be borne in mind that these companies are mostly small and non-UK domiciled ones.

Changes to the statutory scheme will require companies to make payments back to the Department of Health based on their level of sales to the NHS—this can be in addition to other mechanisms—whereas the existing statutory scheme operates via a cut to the published list price, which is currently set at 15%. The existing statutory scheme therefore brings in less money, but also results in inequity to companies, risks to supply and uncertainty of financial outcomes for complex reasons that, fortunately for hon. Members, I will not go into. The Bill also proposes new penalties for non-compliance and for the recovery of payments owed through the courts. Ultimately, the Bill creates a more level playing field between companies in the two schemes. It merely extends what is in place for the vast majority of companies, so it is not in any way unreasonable. I do not believe there should be major concerns with regard to the impact on research and investment.

The other element of the Bill involves information powers. The Bill brings together the information requirements for NHS medicines and other supplies in one place in the 2006 Act. It will enable the Government to make regulations to obtain information on the sales and purchases of medicines and other medical supplies from all parts of the supply chain—from the manufacturer to distribution to the pharmacy—for defined purposes. This will improve the data that inform reimbursement arrangements for community pharmacies and GP practices. We hope that it will help to ensure value for money for the NHS.

These are positive proposals, but it is important that they are not overbearing on the companies concerned. In particular, I want to make the case for medical technology and devices businesses, which have not been subject to such data collection in the past. The Secretary of State has given us some reassurances about that today, but we need to recognise that a large proportion of them—99%, I think—are small or medium-sized enterprises, so we need to work with the industry to develop appropriate regulations. We need to avoid onerous and certainly routine data collection beyond what is already required by Her Majesty’s Revenue and Customs.

In summary, I support the principles of the Bill—in fact, the Association of the British Pharmaceutical Industry largely supports the Bill as well—but the detail will be subject to consultation during 2017. I look forward to scrutinising the progress of the Bill over the coming months.

Health Service Medical Supplies (Costs) Bill (First sitting)

James Davies Excerpts

Committee Debate: 1st sitting: House of Commons
Tuesday 8th November 2016 Public Bill Committees

[Dr James Davies (Vale of Clwyd) (Con)]

Q I want to return to the medical supplies issue, if only because this is perhaps the more controversial aspect of the Bill. I met with Coloplast yesterday evening. It is concerned about the potential impact of the control of prices and information disclosure requirements on investors. To what extent do you think that investment is at risk as a result of the provisions of the Bill? Further to that, you have suggested that all medical supplies, or reference to them, should be removed from the Bill. Failing that, what reassurances would you like to see, bearing in mind that there are already information-gathering powers in the 2006 Act?

Philip Kennedy: Yes, of course those have not necessarily been enforced or used in practice. Coloplast is a large US multinational. It is active, but it is not actually a member of the Association of British Healthcare Industries, I believe. I could understand its anxiety that a more bureaucratic system that could cut prices or onerous data collection over a long period would frighten investors off. Anything that does that in our sector would not be welcome. However, I think it is less onerous for the larger companies, which would have more substantial resources to crunch data and produce the type of information that Mr Smith has talked about being readily available. That is not really our concern. Our concern would be for the smaller businesses, which simply do not do this, and about the disproportionate impact on them. However, I take the concern that Coloplast and other US multinationals, which have invested heavily in the UK life industry, the life science sector, over the years, would have in seeing this legislation as not attractive to them as investors.

[Martyn Day (Linlithgow and East Falkirk) (SNP)]

Q The Scottish Government have used payments from the PPRS towards a specific fund for access to new medicines. Does the panel think that a similar model would be good elsewhere in the UK?

Dr Ridge: From an NHS England point of view, the ring-fencing of moneys to support medicines, which I guess is what you are referring to, is not a position we have previously supported. We largely want to retain the position whereby NHS England and clinical commissioning groups are able to determine their own priorities, in terms of how available funding or savings are used. That is where we are on that. Priorities vary, as you know, from locality to locality and the ability to utilise moneys in a way determined locally strikes me, and strikes NHS England, as being the way to go.

--- Later in debate ---

[Andrew Selous]

Q What is the general perception about operating within the UK then among the members?

David Watson: I think that we would all say that the UK has had a strong life sciences sector. We have a very strong, productive pharmaceutical sector. Lots of current medicines have been discovered here. It is a challenging market, to put it in those terms, to operate in for companies. It is increasingly challenging for a number of reasons, not just the commercial environment.

[Dr Davies]

Q We have received correspondence from an individual who takes liothyronine, as does one of my constituents who is affected by the current issues. He has pointed out that the company that manufactures that makes an excess profit of £50,000 a day as a result of the hike in prices. With that in mind, do you think that the proposed maximum fine, the penalty of £100,000 or £10,000 a day, is sufficient?

David Watson: I am not aware of the individual product. We support the Bill in so far as the Government need to be able to have the powers to step in where they spot that there have been price hikes that are not justified. It is entirely appropriate that the Department is able to question companies on why that price has gone up. If it has gone up unreasonably, it is entirely correct that they should reduce it. What I would say, though, is that the majority of branded medicines, for example, covered by the PPRS, have an affordability mechanism underneath them. For example, we repay under the PPRS the difference in NHS spend on medicines; so regardless of the list price, which is often quoted for medicines, very often there are significant deals being made underneath that with the NHS.

[Dr Whitford]

Q Obviously, one of the problems with the generics was companies that are in the PPRS but also producing generics, and the Bill looks at strengthening the statutory scheme and getting rid of this. Do you think that this is the right way go, to still have two systems, or do you think a single system such as a statutory scheme would have been more helpful?

David Watson: No, we think it is better overall to have a scheme that industry negotiates. So as for generics pricing, we agree that the loopholes should be closed and the Department should have the same powers that apply, regardless of which other scheme companies are in. As for branded medicines, I think we would say that we have had in this country a voluntary PPRS for a number of years. I think that it serves both sides very well. You also need a statutory back-up for companies that for some reason do not choose to be in the PPRS. So, by default, you end up with essentially two schemes on branded medicines, but we think that there are benefits to the taxpayer, to patients, to the industry, in having a voluntary scheme.